About EMR

The Department of Business, Energy and Industrial Strategy (BEIS) estimates that investment of around £100 billion is required in electricity generation and transmission in this decade alone in order to replace the UK’s ageing assets and meet its three high level objectives:

decarbonisation of the electricity sector

energy security; and

affordability.

To help secure investment of this scale, BEIS (formerly DECC) created the Electricity Market Reform (EMR) programme, consisting of four mechanisms combined to deliver secure supplies and new low carbon generation:

the Contracts forDifference (CFD) scheme to support investment in new low carbon generation (replacing the existing Renewables Obligation);

the Capacity Market scheme, including demand response as well as generation, to facilitate future security of supply;

a Carbon Price Support (announced in Budget 2011), aimed at reducing investor uncertainty, putting a fair price on carbon and providing a stronger incentive to invest in low-carbon generation;

an Emissions Performance Standard set at 450g CO2/kWh to ensure that no new coal-fired power stations are built without CCS, and also aimed at facilitating necessary short-term investment in gas.

BEIS (formerly DECC) also created two new companies to help deliver these schemes alongside National Grid (as system operator), Elexon (as BSC operator) and Ofgem (as regulator):

Low Carbon Contracts Company Ltd (LCCC) to be the counterparty to and manage Contracts for Difference (CFDs) throughout their lifetime; and

Electricity Settlements Company Ltd (ESC) to oversee settlement of the Capacity Market agreements.